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Only 25% of bonds listed on Stock Exchange are secured

Interest down from 6.6% in 2011 to 4.7%

Only a quarter of the outstanding bonds listed on the Malta Stock Exchange are secured, with just under half of them guaranteed, either by other companies or by guarantors, the Central Bank of Malta warned on Friday.

Fewer than 7 per cent of the bonds required the setting up of a sinking fund to support the repayment of these bonds.

In its annual report on the financial stability of the jurisdiction, the bank noted that the issue of bonds was beneficial as it diversified credit risk and boosted the local capital market.

“Nevertheless concerns for investors remain as bonds do not carry similar safety nets as in the case of bank deposits, and are also subject to market movements and interest rate risks,” it said.

The issue of bonds mirrors the situation in the banking sector, where the restrictions push companies to seek alternative financing, or where bonds reduce the need for bank loans. Between 2011 and 2017, bonds for the accommodation, food and services sector were up by 79.7 per cent, while their bank loans dropped by 34.9 per cent.

The report said that risk in the financial sector as a whole had improved since 2016 as the result of sustained positive economic developments.

IN NUMBERS

• Amount of outstanding bonds: €1.2 billion – double that in 2011.

• Percentage held by households: 81%

• 40% of bonds are rolled over

• 22% of bonds used to repay bank loans or other debt

• Construction and real estate bonds represent 24.4% of total

• Weighted average interest rate down from 6.6% in 2011 to 4.7%

Attached files

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